Nexen changes strategy to sublease Plano HQ

The race to sublease Nexen Petroleum U.S.A. Inc.’s corporate office space before it moves its headquarters from Plano to Houston has hit a new stride.

With its 14-story, 325,000-square-foot build-to-suit project in Houston scheduled for completion in early fall, Nexen Petroleum has changed its real estate strategy in hopes of having its 104,000 square feet of office space fully subleased by the end of the year.

The petroleum company, a wholly owned subsidiary of Nexen Inc. (NYSE: NXY), is consolidating and moving its headquarters to Houston to be closer to its business near the Gulf of Mexico.

Nexen has decided to parcel out its existing lease into full-floor leases to attract smaller tenants to each of its four floors of Class AA office space at Granite Park at 5601 Granite Pkwy. in Plano.

For nearly a year, Nexen was hoping to land one large tenant in the highly desired Plano submarket, but the fit hasn’t been right.

“We had a long lead time with the construction of the building in Houston, and our initial effort was to find a single tenant and do one sublease,” said Scott Collier, a managing director at Jones Lang LaSalle. “But those larger users needed dense parking.”

Collier and Doug Carignan of Jones Lang LaSalle are representing Nexen in its efforts to sublease its space. The company has roughly seven years left on its lease.

The duo is marketing the subleased space for $25 to $27 per square foot, which is a discount based on similar quality product in the market that cost more than $30 per square foot.

The decision to parcel out the full lease and market it as four separate leases — one for each of Nexen’s floors 11-14 — has garnered significant interest, Collier said.

“We’ve started to show single floors and are seeing quite a bit of activity,” he said.

A popular market

Part of that interest rests on the popularity of the West Plano/Frisco submarket, which has continued to lower its vacancy rate over the past year.

The submarket’s vacancy rate decreased to 10.9 percent in the first quarter from 13.7 percent year over year, according to the latest data from Cushman & Wakefield of Texas Inc.

That interest has sparked development.

Construction is under way on Plano-based Heady Investments’ speculative six-story, 164,000-square-foot building, and Dallas-based Trammell Crow Co. is in the planning process of developing a large two-building office project at the southeast corner of Legacy Drive and the Dallas North Tollway.

However, subleased space isn’t counted in that vacancy rate, and T-Mobile USA and Denbury Resources Inc. also have office space available for sublease in the submarket.

Each company has roughly 100,000 square feet of office space available in the West Plano/Frisco submarket.

Cinderella’s slipper

“Subleasing space is one of the most difficult things a company can do,” said Matt Heidelbaugh, a senior director at Cushman & Wakefield of Texas Inc. “It’s like going out with a Cinderella slipper to find a tenant that wants that size, that color and that style of space. There is no flexibility in lease terms, and the only way you can sublease that space is to lower the rent.”

Heidelbaugh has toured Nexen’s space with an undisclosed tenant.

Companies subleasing office space typically see a 40 percent to 50 percent recovery of a lease, he said. But Nexen’s space is in high demand, and the company is throwing in office furniture, phones and other equipment in the deal that could have some value, he said.

An added bonus: the seven years left on the lease.

Based on the submarket and those added bonuses, Nexen could see a 50 percent to 60 percent recovery of its lease, Heidelbaugh said.

“The area is hot right now,” he said. “This sublease could do better than most subleased space.”